The Ohio Bankruptcy Means Test Explained
Every year, millions of Americans struggle with unmanageable debt due to job loss, medical bills, and other unpredictable life events. When consumer debt begins to snowball out of control, many people consider filing for bankruptcy to stay afloat and get their finances back in order.
Filing for bankruptcy can help you resolve your financial difficulties and get a fresh start. However, it’s important to understand that not everyone is eligible to file for bankruptcy. Depending on the type of bankruptcy you file, there are different restrictions in place that limit the amount of debt, assets, or income you can have and still qualify.
The bankruptcy means test determines whether a person is unable to repay their debts and is eligible for bankruptcy protection. If a person passes the Ohio means test for Chapter 7, they can file for this type of bankruptcy relief.
If you’re considering Chapter 7 bankruptcy in Ohio or wondering how the means test could affect your ability to file, contact the knowledgeable bankruptcy lawyers of Amourgis & Associates, Attorneys at Law for a free consultation.
History of Chapter 7 Means Test
In 2005, lawmakers decided that a number of people who filed for Chapter 7 bankruptcy did actually have the funds to pay their bills. . As a result, Congress reformed the Bankruptcy Code to include an extra step for Chapter 7 filings called the “means test.”
The means test is designed to limit the number of people who can file under Chapter 7 to only those who are otherwise truly unable to pay their debts. If your income is below the state median income for a household the same size as yours, there is a presumption that you pass the means test and are eligible to file a Chapter 7 bankruptcy.
If your income level is above the median income in your state, you will have to show that you pass the means test, based on your monthly disposable income. Your disposable income is based on your average monthly income less allowable expenses. There are special rules to determine both of these figures.
What Is the Ohio Median Income?
The simplest way to pass the personal bankruptcy means test in Ohio is to show that the annual income or current monthly income (CMI) for your household is less than the median income for other Ohio households of the same size.
To calculate your CMI, add up all of your income from the past six months and divide by six to find the monthly average. If your income is less than the Ohio median income for a household of the same size, you are presumptively eligible to file Chapter 7.
For cases filed on or after May 1, 2021, the median income for households in Ohio are:
- $4,367.92 per month or $52,415.00 per year for a household of one
- $5,588.25 per month or $67,059.00 per year for a household of two
- $6,585.17 per month or $79,022.00 per year for a household of three
- $8,014.58 per month or $96,175.00 per year for a household of four
The Full Means Test
If your annual income or CMI exceeds the Ohio median income, you can complete the full means test to see whether you can still qualify.
To perform a full Ohio bankruptcy means test, you’ll need to subtract reasonable and necessary monthly expenses from your income to determine how much disposable income you have. Reasonable and necessary expenses include things like:
- Mortgage or rent
- Transportation expenses
- Food
- Utilities
- Life insurance
- Court-ordered payments
- Childcare
- Involuntary paycheck deductions
- Out-of-pocket healthcare costs
For some of these expenses (like childcare), you use the actual amount you pay each month. For others (like out-of-pocket healthcare costs), you can only deduct a standard allowance provided by the Internal Revenue Service. Some of the standards are the same for filers across the nation, but others vary based on the county where you reside. To ensure that you complete this process correctly, it is best to work with a knowledgeable bankruptcy lawyer who can help complete the necessary forms and perform the right calculations.
In many cases, individuals who complete the Ohio means test for Chapter 7 can show they don’t have as much disposable income as they need.
As soon as you can demonstrate that your CMI is less than Ohio’s median or that you pass the full means test, you are qualified under Chapter 7 of the Bankruptcy Code.
Ohio Means Test Exemptions
In some circumstances, you may be exempt from the means test, so even if your income is over the state median income and you otherwise would fail the means test, you may still be eligible to file for bankruptcy. Exemptions include:
- Your debts are not primarily consumer debts, such as credit card debts or medical debts.
- You are a disabled veteran who incurred your debt primarily during active duty or performing a homeland defense activity.
What Happens If You Fail the Means Test in Ohio?
If you failed the personal bankruptcy means test because your current monthly income is too high, you may still have other options to get bankruptcy relief. For one, you can evaluate your CMI and expenses to see whether you expect anything to change in the coming months, and file for Chapter 7 later. The means test for Chapter 7 only considers your finances over the past six months. If your income or expenses change on a seasonal basis, your financial picture could be very different six months from now. If so, it could be worth it to wait and try again later.
If your disposable income is simply too high, you will not qualify to use Chapter 7 because you will be expected to use that money to pay back your creditors. However, you may still be able to receive some bankruptcy relief by filing under Chapter 13 instead.
Our Ohio Bankruptcy Lawyers Can Help
At Amourgis & Associates, Attorneys at Law, we only want what’s best for you. You can count on our team to provide an honest, transparent assessment of your case to give you the information you need to map out your ideal strategy. We will never pressure you to file for bankruptcy or make any other decision that you’re not comfortable with.
No matter your circumstances, an experienced Ohio bankruptcy attorney can help you evaluate your unique financial situation and determine the best path forward. In some cases, you may even be able to pursue other debt management strategies and avoid bankruptcy entirely.
When you’re ready to discuss the details of your situation with an attentive bankruptcy lawyer, contact us to get started with your free case review.
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At Amourgis & Associates, Attorneys at Law, we only represent consumers. We fight for regular people who have been seriously hurt in accidents. We fight for people who are being crushed by overwhelming debt and need a fresh start. We fight for individuals and families. Never businesses. Never insurance companies. We are loyal to the consumer.
